What's the Better Choice?

Question

I have a motivated seller who is looking to relocate; wants to sell her place for 75K --no repairs are needed and it's move in ready and the value is right at $111K.

Should I try to wholesale this to an investor or should I try and retail it and make even more? First potential deal.

-Thanks

Wayne Grogan · Answer

Thanks Jason.  Gives me a little more idea and what to be looking for now.

Michael Shadow · Answer

Another thing about retailing it, if the RE agent recommends the buyer to get an inspection done and the inspector finds something major and backs out of the deal because of it then you are required to disclose that info to all future potential buyers.  Not that you would try to hide something on purpose but when you're new things can easily get overlooked and come back to bite you later.

-Michael

Jason Cummins · Answer

Here is how I see this deal according to the numbers provided.

If you were to wholesale this property.  Knowing that end buyers want properties that are 70% or lower of the ARV, let's do some math.

According to these numbers, the ARV is $111,000.  So 70% of $111,000 is $77,000.

We then subtract from $77,000 the repair costs.  Acorrding to this deal that number is $0.00.  Just for show, $77,000 - $0.00 = $77,000.

From this number we would subtract what we want to make on this deal.

What we know though is the people want $75,000 for it.  That would leave room for a $2,000 assignment fee on this deal.  Which is why I mentioned maybe trying to offer lower than the $75,000, maybe $69,000.  You would then have a $7,000 spread you can work with and possibly make.

As far as choosing between rehabbing and wholesaleing it all depends on your risk factor.  There is MUCH less risk with wholesaling as you never really own the property.  But you can make much more as a rehabber if you have the stomach and the know how to do so.

In comparison, if the offer stays at $75,000.  You would only make $2,000 on this deal as a wholesaler.  Not bad for not much work.  But if you want to make more risk and you are a rehabber and want to buy and sell retail, then you can make around 27,000 if it sells for the $111,000.00 (111,000 minus $75,000 is actually $36,000, but then I figured closing costs and realtor fee's of around $9,000, so that makes $27,000)

Alex Locklear · Answer

Thanks Jon, I'll keep you posted as to what happens with this one; going to look at the place tomorrow.

Is there anyway to market this as both a wholesale and retail? Meaning can I somehow market at retail for higher and wholesale cheaper.

Thanks

Jon Holdman · Answer

In reality, the costs for a retail sale will be higher than what Jason says.  For one thing, there are the holding costs.  Even if the existing seller will do a subject to, there is still money costs.  Hard money will be much more, probably in the range of $5-8K.  Plus insurance and utilities.

I guarantee there are rehab costs.  It may look OK now, but when the seller moves out, it will look ratty.  At the very least, a coat of paint will be in order.  Maybe more than that.

The equity in the house won't help a bit with making it sell faster.  What will help is to price it lower than any other house.  If you can spiff it up to be nicer than any other house in the area, and price it cheaper than any other house, and houses are actually selling in that area, it will sell quickly.

Alex Locklear · Answer

I hope the house can be sold within 30 days as a retail...do you suppose since the house has lots of equity, that it will help sell faster?

Jeff Fairchild · Answer

Which begs the question, when do people on here decide to wholesale deals and when should you retail it?

Wayne Grogan · Answer

For Jason C. 
As a person who is still undecided on what field, wholesale or rehab/retail, what would be a good assignment fee on the mentioned property?

Jason Cummins · Answer

You would definitely make more money retailing it.  So if you can swing it, then do it.  The deal is VERY close to 70% of ARV.  You will not make much wholesaling this deal, but you should do pretty good if you buy it and flip it retail.
            
            Obviously depending on if the ARV you mentioned is accurate.

I would also try to offer lower to see if that is possible at all.  Maybe $69,000?